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REG - Catalyst Media Group - Final Results <Origin Href="QuoteRef">CMX.L</Origin>

RNS Number : 2868H
Catalyst Media Group PLC
30 November 2015

Catalyst Media Group plc

("CMG" or the "Company")

Final Results for the year ended 30th June 2015

The Board of Catalyst Media Group is pleased to announce the final results for the Company for the year ended 30 June 2015. CMG is a 20.54% shareholder of Satellite Information Services (Holdings) Ltd ("SIS") and the results for the year to 30 June 2015 incorporate its share of the profits of SIS for its year ended 31 March 2015.

Financial overview

CMG profit before taxation 1.4 million (2014: 3.0 million loss)

Earnings per share 5.62p per share (2014: 10.83p loss per share)

Net Asset value per share 98.4p (2014: 92.3p)

SIS Revenues for year ended 31 March 2015 229.0 million (2014: 253.8 million)

SIS total operating profit: group and share of joint venture and associates 25.9 million (2014: 24.2 million)

SIS profits after tax and exceptionals 21.4 million (2014: 6.9 million)

SIS net cash inflow from operating activities 37.8 million (2014: 50.2 million)

Chairman's comment

"The recent announcement of an agreement with Racecourse Media Group ("RMG") secures the future continuation of services to the retail betting industry well beyond 2018 and removes previous uncertainties concerning the future beyond that date. Current trading is in line with management expectations but after 2018 the financial model for this part of the business will significantly change. Meanwhile SIS continues to generate significant cash flow."

Enquiries:

Catalyst Media Group:


Michael Rosenberg

Non-executive Chairman

+44 (0)7785 727 595

Melvin Lawson

Non-executive Director

+44 (0)20 7734 8111



Strand Hanson Limited:

+44 (0)20 7409 3494

James Harris

Richard Tulloch




Chairman's statement

I am pleased to present the results for Catalyst Media Group Plc (CMG) for the year ended 30 June 2015, which incorporates our share of profits for Satellite Information Services (Holdings) Ltd (SIS) in which CMG has a 20.54% interest.

After taking account of CMG's share in the profits of SIS for its year ended 31 March 2015 of 4.4 million (2014: 1.3 million), CMG recorded a profit before taxation of 1.4 million, following an impairment charge of 2.8 million (2014: loss of 3.0 million, following a 4.2 million impairment charge). Net Assets at the year end were 25.0 million (98.4p per share) (2014: 25.5 million (92.3p per share)).

The main asset of CMG continues to be the 20.54% share in SIS. CMG equity accounts for its share in the profits of SIS. For the year ended 31 March 2015, SIS had revenues of 229.0 million (2014: 253.8 million) of which 207.3 million were derived from Betting Services (2014: 198.2 million) and 21.7 million from SIS LIVE Services (2014: 55.6 million). The total operating profit for SIS was 25.9 million (2014: 24.2 million). Profits after exceptionals and taxation were 21.4 million (2014: 6.9 million). The share attributable to CMG after tax was 4.4 million (2014: 1.3 million). SIS's Net Cash inflow for the period was 37.8 million (2014: 50.2 million) from operating activities. SIS's operating profit margin(1) increased slightly to 11.1% compared to 10.3% (restated) for the previous year.

(1) SIS's operating profit margin is the ratio of SIS's operating profit (total operating profit before exceptional items and share of associate and joint venture) to revenues expressed as a percentage.

Review of CMG's investment in SIS

SIS's management expects revenues for its financial year to 31 March 2016 to be of a similar magnitude to 2015 but with operating profit being lower due to three main factors; costs associated with the restructure of the betting business to a more efficient model, the diversification into the digital sector which is a drain on profits at this stage of the development cycle and a reduced contribution from joint ventures following the sale of SIS's interest in Dock 10 in August 2015. The current media rights deals have largely included a partial advance payment element resulting in a robust cash generative business through to March 2018 and the commencement of the new rights contract announced in September 2015 between SIS and Racecourse Media Group (RMG).

The board of CMG (Board) has reviewed the value of its interest in SIS in the light of the comments from SIS and has also discussed the various scenarios that may impact the business of SIS over the next few years, including in particular the new arrangements with RMG. With the positive cash flow predicted over the next three years from existing activities and taking account, inter alia, of the present net asset value of SIS, the Board has concluded to maintain the value of its investment at 25m. Accordingly, as detailed in note 1 to the financial statements, following CMG's share of SIS's profits in 2015, this has resulted in an impairment of its investment in SIS of 2.8 million.

SIS Betting

The services to the betting industry are supported in the main by fixed term media contracts which include horse racing and dog track racing. A large proportion of the media portfolio expires between 2017 and 2020. In September 2015 SIS and RMG announced a new five year deal for the provision of pictures and data from all of RMG's fixtures, which accounts for a significant proportion of all racing in the UK, to bookmakers to commence in April 2018 and run till 2023.

This agreement will ensure that SIS will continue to be an important provider of UK horseracing media and data to the retail betting industry well beyond 2018, when the majority of the present rights are due to expire. Under the agreement, RMG will maintain responsibility for collecting pictures and data from RMG's production facility in Ealing, West London and will make it available to major bookmakers for inclusion in their in house channels, the majority of which are produced by SIS. In addition the pictures and data will be included in an SIS produced channel for bookmakers who currently rely on the SIS FACTS channel.

While this arrangement ensures continuity for the business for the foreseeable future it will significantly change the financial model for this division of the business. The board of SIS expects the business to continue to generate significant profits and cash up to 2018 but this is dependent, inter alia, on renewal of existing customer contracts in a time of significant uncertainty in the retail betting market. After 2018, the contribution from racing revenues can be expected to fall substantially from current levels. Other sources of revenues may arise but are not capable of being predicted at this stage.

SIS Management is pleased that it has reached a media rights agreement with RMG and confirms that all conditions necessary to make the contract binding on all parties have now been satisfied. UK horseracing is a very important part of SIS's product offering and this agreement clearly signals to both customers and other rights holders, that SIS will maintain its position in the supply chain of media and data from sporting events for use by bookmakers for the foreseeable future. SIS management remain focussed on developing more efficient commercial models, such as those implemented with RMG, that will be attractive to both rights holders and customers. While such arrangements are likely to generate less profit, they expect the low risk, open and collaborative nature of the arrangements to be very effective in aiding SIS to renew existing arrangements, sustaining its position in retail and also assisting SIS to succeed in the growing digital market.

The retail betting market in SIS's core market of UK and Ireland remains under commercial, regulatory and social pressure with the prospect of market consolidation and shop closures remaining likely. This represents a significant risk to future financial performance because SIS's cost base is largely fixed and the income stream variable according to the number of shops buying SIS's products. Although new commercial arrangements will gradually address this as current rights expire, SIS's management is also undertaking ambitious internal changes to drive cost out of the business and to increase efficiency. These measures include the outsourcing of non-core activities, such as field engineering work, and the automation of business processes across the business. The complete programme of business improvements is scheduled to take approximately two years to complete.

Greyhound Racing

SIS's management has recently renewed its rights agreement for two of the premier greyhound tracks (Hove and Romford), which is a significant step towards retaining a strong greyhound product for SIS customers for the foreseeable future.

SIS LIVE

SIS's management has recently achieved the internal separation of its subsidiary SIS LIVE, which focusses on critical connectivity solutions for the broadcasting industry. SIS LIVE provided connectivity for all matches in the 2015 Rugby World Cup, using a combination of fibre and satellite connectivity solutions. The successful completion of this contract for ITV clearly demonstrates SIS LIVE's capabilities and is expected to lead to further successes in this market. SIS LIVE is also undergoing a programme of efficiency improvements cost reductions while continuing to pursue commercial success in new areas of business such as the development and sale of satellite communications hardware.

SIS LIVE's revenues for the year ended 31 March 2015 decreased following the closure of SIS's Outside Broadcast Division, which accounted for a significant proportion of SIS LIVE's revenues, in 2014.

India

As has been previously reported, significant payments due to SIS LIVE arising from a contract for television production at the 2010 Commonwealth Games (CWG) in India are in dispute. Arbitration proceedings have started to recover the outstanding payment.

SIS LIVE received a draft assessment in March 2014 from the Indian tax authorities in relation to financial year ended 31 March 2011. On the advice of its lawyers and tax advisors it has commenced appeal proceedings through the Dispute Resolution Panel (DRP) of the Indian Tax Authority.

The net effect of claims and counterclaims, including the tax claim, is not expected to be material.

SIS Results

The results of SIS for the year ended 31 March 2015 are as follows:


31 March 2015

31 March 2014

Restated*


'000

'000




Revenue

229,035

253,446


---------

---------




Operating expenses

(203,612)

(229,959)




Operating profit before exceptional items

25,493

26,193

Exceptional items

(70)

(2,706)

Operating profit

Share of operating profit/(loss) of joint venture:

- joint venture

- associate

25,423

442

-

23,487

475

(40)

Total operating profit

Profit / (Loss) on the managed wind down of business

Profit on disposal of associate

Profit on disposal of tangible assets

25,865

1,064

40

5

23,922

(10,495)

-

796

Net interest payable

(590)

(2,192)




Profit on ordinary activities before tax

26,384

12,031




Tax on profit on ordinary activities

(4,984)

(5,404)




Retained profit transferred to reserves

21,400

6,627

*The prior year figures within the financial statements of SIS have been restated following a management review of their revenue recognition methods in relation to customer contracts.

+ Profit/(Loss) on the managed wind down of business relates to the closure of SIS's Outside Broadcast Division in 2014.

Dividends

No dividends have been declared in the period under review, however, in the light of the present high levels of cash and the prediction of further additions from future cash flow it is expected that SIS may declare dividends in the near future, though the timing and quantum of these remains uncertain.

Outlook

SIS remains profitable and cash generative in the immediate term and is planning the necessary steps, albeit in a challenging environment, to ensure the future profitability of the business. Current trading is in line with SIS's management expectations.

CMG continues to operate at a low overhead cost. Pending the receipt of any dividends from SIS, the Board has made arrangements to ensure sufficient funds are available to meet those costs.

AGM

The Annual General Meeting of the Company will be held on 14 January 2016 at 3.00 p.m. Formal Notice of the meeting is set out at the end of the report and accounts together with proxy forms.

Michael Rosenberg OBE

Chairman

Consolidated statement of comprehensive income for the year ended 30 June 2015




Restated



Year ended

Year ended



30 June

30 June



2015

2014







Revenue


25,000

25,000





Cost of sales


-

-





Gross profit


25,000

25,000





Administrative expenses


(119,991)

(111,259)

Other operating income


-

3,172





Operating loss


(94,991)

(83,087)





Financial income


1,012

2,898

Financial costs


160

-

Net financial income


1,172

2,898





Share of profit of equity-accounted associate, net of tax


4,352,427

1,302,031

Impairment of equity-accounted associate


(2,836,073)

(4,233,017)





Profit / (loss) before taxation


1,422,535

(3,011,175)





Taxation


22,866

17,888





Profit / (loss) for the year


1,445,401

(2,993,287)





Share of other comprehensive loss of associate


(489,469)

(69,014)





Total comprehensive profit / (loss) for the year


955,932

(3,062,301)





Attributable to equity holders of the Company


955,932

(3,062,301)





Earnings/(loss) per share:








Basic


5.62p

(10.83p)





Diluted


5.62p

(10.83p)





Before impairment


16.66p

4.48p



Consolidated statement of financial position as at 30 June 2015



30 June

2015

Restated

30 June

2014

Assets




Non-current assets




Investment in associate


25,000,000

25,000,000







25,000,000

25,000,000





Current assets




Trade and other receivables


30,660

31,097

Cash and cash equivalents


16,969

538,416







47,629

569,513





Total assets


25,047,629

25,569,513





Equity and liabilities








Capital and reserves attributable to equity holders of the parent




Share capital


2,541,136

2,764,567

Capital redemption reserve


273,183

49,752

Merger reserve


2,402,674

2,402,674

Retained profits


19,788,694

20,311,755





Total equity


25,005,687

25,528,748





Current liabilities




Trade and other payables


40,480

31,399

Corporation tax payable


1,462

9,366



41,942

40,765





Total equity and liabilities


25,047,629

25,569,513



Consolidated statement of cash flows for the year ended 30 June 2015




Restated


Year ended

30 June

2015

Year ended

30 June

2014





Cash flow from operating activities




Profit / (loss) before taxation


1,422,535

(3,011,175)

Adjustments for:




Share of profit from associate


(4,352,427)

(1,302,031)

Impairment of associate


2,836,073

4,233,017

Finance income


(1,012)

(2,898)

Finance expense


(160)

-

Corporation taxes recovered


14,962

27,446





Net cash flow used in operating activities before changes in working capital


(80,029)

(55,641)

Decrease / (increase) in trade and other receivables


439

(21,604)

Increase / (decrease) in trade and other payables


9,080

(10,000)





Net cash flow used in operating activities


(70,510)

(87,245)





Investing activities




Dividend received


1,026,884

-

Interest received


1,012

2,898





Net cash flow from investing activities


1,027,896

2,898





Financing activities




Shares purchased into Treasury


(1,478,993)

-

Interest paid


160

-





Net cash flow used in financing activities


(1,478,833)

-





Net decrease in cash and cash equivalents in the year


(521,447)

(84,347)

Cash and cash equivalents at the beginning of the year


538,416

622,763





Cash and cash equivalents at the end of the year


16,969

538,416



Notes

1 Investment in associate

Year Ended 30 June 2015


Share of net assets

Fair Value of Intangibles

Total



Group

Group

Group



Cost





At 1 July 2014 - as previously stated


13,786,363

11,213,637

25,000,000

Prior year adjustment


(65,316)

65,316

-

Share of profit - 2015


4,352,427

-

4,352,427

Share of other comprehensive loss - 2015


(489,469)

-

(489,469)

Dividend received - 2015


(1,026,885)

-

(1,026,885)

Impairment - 2015


-

(2,836,073)

(2,836,073)

At 30 June 2015 - CMG share of SIS net assets


16,557,120

8,442,880

25,000,000






Year Ended 30 June 2014 - restated


Share of net assets

Fair Value of Intangibles

Total



Group

Group

Group



Cost





At 1 July 2013


15,222,726

12,777,274

28,000,000

Share of profit - 2014


1,302,031

-

1,302,031

Share of other comprehensive income - 2014


(69,014)

-

(69,014)

Dividend received - 2014


-

-

-

Impairment - 2014


(2,734,696)

(1,498,321)

(4,233,017)

At 30 June 2014 - CMG share of SIS net assets


13,721,047

11,278,953

25,000,000






(i) The impairment charge 4,233,017 (restated) comprises 2,734,696 relating to cumulative adjustments in respect of amortisation of goodwill no longer required as the goodwill is no longer held by SIS and 1,498,322 relating to the adjustment to the fair value of the Group's investment in SIS.

The Group's interest in the associate, SIS, a company incorporated in England and Wales, is held by Alternateport Limited. Alternateport Limited holds an investment of 20.54% in the equity share capital of SIS and is entitled to appoint a director and alternate director to the SIS board. This right has been exercised since acquisition. Alternateport Limited is a wholly owned subsidiary of Catalyst Media Holdings Limited a wholly owned subsidiary of Catalyst Media Group plc.

The Board has reviewed its valuation of the investment in SIS as at 30 June 2015. It has taken account of the closure of the Outside Broadcast Division and the exceptional costs incurred. In addition it has reviewed internal forward projections prepared by the management of SIS which include expectations of future cash flows from the business. It has applied a present day value to the expected cash flows using a discount rate of 7.50% and has taken account of the uncertainty surrounding the extension of media rights as well as the expected decline in numbers of retail betting shops. As a result, it has been concluded that an impairment of 2,836,073 should be applied to the investment resulting in a value of 25,000,000 as at 30 June 2015.

Prior year adjustment

The prior year figures within the financial statements of SIS were restated following a management review of the revenue recognition methods in relation to customer contracts. The share of profit from associate in the Catalyst Media Group plc accounts has therefore been restated accordingly with the impact being a decrease in the share of profit from associate for the year ended 30 June 2014 of 65,316. As it was previously concluded that the value of Catalyst Media Group plc's investment was 25,000,000 as at 30 June 2014, the impairment charge for the year to 30 June 2014 has also been restated and reduced by 65,316. There was therefore no impact on the net assets of CMG as at 30 June 2014.

Share of profit of associate

2015

SIS Total

'000

2015

CMG share

'000

2014

Restated

CMG share

'000

Revenue:




SIS Betting Services

207,355

42,591

40,642

SIS LIVE Services

21,680

4,453

11,416

Total revenue

229,035

47,044

52,058





Operating profit (i)

25,655

5,270

4,855









Net interest payable

(590)

(121)

(450)

Profits / (losses) on business wind down

1,064

218

(2,156)

Profit on disposal of fixed asset

40

8

163

Profit on disposal of fixed asset

5

1

-

Profit before tax

26,174

5,376

2,412

Taxation

(4,984)

(1,024)

(1,110)

Share of profit after taxation

21,190

4,352

1,302

Net income from associate

21,190

4,352

1,302





Other comprehensive income:




Actuarial loss

(2,973)

(610)

(90)

Deferred tax

590

121

21


(2,383)

(489)

(69)





Share of net assets and liabilities of associate




Net assets (i)

146,431

30,077

36,657

Net liabilities (i)

(65,822)

(13,520)

(22,936)

Net equity

80,609

16,557

13,721

(i) The financial results for SIS are taken from its latest accounts to 31 March 2015, adjusted in order to align the accounting policies of SIS (whose accounts are prepared under UK GAAP) and Catalyst Media Group plc (whose accounts are prepared under International Financial Reporting Standards). Adjustments have been made in respect of the recognition of the fair value of derivatives held by SIS as at the balance sheet date. The net cumulative effect of these adjustments is to decrease the value of the investment in associate in the Group's financial statements by 140,000 (2014: 97,000).

2 Basis of preparation

These consolidated financial statements of CMG have been prepared in accordance with accepted International Financial Reporting Standards (IFRSs), International Accounting Standards (IAS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations (collectively "IFRSs") as adopted for use in the European Union and as issued by the International Accounting Standards Board and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

CMG is a publicly limited company registered in England and Wales where it is domiciled for tax purposes.

The financial statements are prepared under the historical cost convention.

3 Annual Report

The Annual Report for the year ended 30 June 2015 will be available today from the Company's website www.cmg-plc.com.

The Annual General Meeting will be held at 6 Stratton Street, London W1J 8LD, at 3.00 p.m. on 14 January 2016.


This information is provided by RNS
The company news service from the London Stock Exchange
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